UK acts on e-commerce VAT fraud?

Mon 14th Mar 2016

Ahead of this week’s UK budget, speculation is emerging that the Chancellor, George Osborne, will act to curb potential VAT fraud on goods sold to EU consumers by non-EU sellers on eBay, Amazon and other e-commerce platforms.

There has been a great deal of publicity around the issue in the UK media recently. It has been claimed that non-EU businesses, particularly from China, have been selling goods on the platforms without correctly charging UK VAT. Many such sellers are said to be non-UK VAT registered, as required, and undercutting domestic suppliers by not charging UK VAT at 20% on sales to UK customers. The problem is allegedly costing the UK millions in lost VAT revenues.

UK action on non-EU sellers

The options for controlling such fraudulent sellers could come through two routes:

  1. Requiring the e-commerce platforms to request valid UK or EU VAT numbers from sellers prior to admitting them onto their platforms; or
  2. Obliging freight forwarders, who import the goods into the UK on behalf of the non-EU sellers, to request valid EU VAT numbers in advance of the shipment.

It is unclear what powers the Chancellor has to enforce the above requirements.

The amount of missing VAT is unclear.  Non-EU sellers have to suffer the import VAT due when they bring the goods into the UK/EU.  This would be 20% in the case of the EU.  Duties would also be due.

The Chancellor’s budget is on Wednesday this week.